Refinery Utilization Rates Dropped Slightly And Tropical Storm Franklin Moving A Different Direction

For the 2nd day in a row, ULSD prices bounced more than 4 cents off their intra-day low in the $3.09 range, settling down just under a penny. Refined products saw just under 1% losses yesterday and are hovering just over flat this morning. Oil benchmarks are headed in the opposite direction with concerns about China’s economic status and whether the Fed will increase interest rates again still weighing on the market.

Yesterday the EIA reported crude stocks drew another 6.1 million barrels last week with all five PADDs showing declines. Imports, exports, and demand all dropped slightly but are still above average, while output ticked up for the third week in a row, inching closer to pre-pandemic levels.

Refined product inventories both posted builds last week as refinery utilization rates dropped slightly. Diesel supply grew despite a sizeable decrease in imports and demand jumping back up to the 5-year average. However, inventories are still hovering below average across the country, with the exception of PADD 2, which crossed that mark for the first time this year. Builds in gas stocks were aided by a 52% increase in imports but are also sitting beneath average levels.

PADD 3 refinery runs were up last week and so far, none of the Corpus area refiners have reported major operational issues from Tropical Storm Harold. Citgo did report a power outage affecting a portion of their plant during the storm but were planning to restart the units and restore full run rates Wednesday. 

Kinder Morgan resumed normal operations on its West pipeline that moves product from Los Angeles to Phoenix after completing repair work to fix damage caused by Hilary’s flood waters. Products across the region remain tight however with several refinery disruptions and limited pipeline capacity across the region restricting options for resupply and pushing rack spreads sharply higher. Las Vegas had the most notable price spike this week with traders paying more than $1/gallon over futures for prompt barrels. 

Tropical Storm Franklin meanwhile is taking an unusual path moving north and east over the Dominican Republic out of the Caribbean and back into the Atlantic. That storm is expected to reach hurricane status over the weekend and will eventually move on a more westerly course that will require the East Coast to keep an eye on its progression. So far none of the other 3 systems being tracked by the NHC look to be a threat to the US.

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